Week 4 -- Pure Competition

Competition is the only thing that affects the agreed upon price. In other words, bargaining has no role in the price you agree on.

This one’s a little harder to think about, but consider this; you need to buy a washing machine and are willing to pay $200 for it, but you have two friends who are moving out of country; each one wants to sell his washing machine and has a WTS of only $50. Your BATNA is 0; the price of a washing machine in the store is $200. Even though your WTP is $200, you’ll get one of the machines for $50, because you only want one machine, and your friends will bid each other down until the price reaches $50. Congratulations! You get all of the surplus, and your bargaining skills had nothing to do with it.